Short term working capital financing has become a difficult task for most commercial borrowers. For business owners facing this situation, it might appear that all is lost if their bank cannot help them. If a banker is not capable of providing working capital, a business owner should waste no time in seeking effective new sources of business loan assistance.

There are at least five significant factors underlying the current difficulty for business borrowers attempting to obtain short term financing. Three of the factors are discussed below, and all of the issues are related to recent commercial lending chaos seen nationwide.

First, unsecured lines of business credit have all but disappeared for many businesses. Due to many banks deciding to eliminate this kind of business financing (rather than a lending decision that is based on the payment history of the business owner), this is occurring in many locations. A business owner will typically receive a minimal 30-day period (in some cases more) to make new financing arrangements by the bank reducing or eliminating a line of credit.

Second, bank requests for more commercial financing collateral are now a frequent occurrence. Providing additional collateral in a depressed economy is not feasible for most businesses because there are likely to be reduced valuations for commercial property and many other business assets.

Finally, many local and regional banks have exited business lending altogether. In practical terms, a significant number of banks operating nationally appear to have made a similar decision (whether they have in fact announced it publicly is another matter).

At least one of the three factors mentioned (or one of the two factors not discussed) has probably already impacted many small business owners. There are some positive developments which will help many businesses, recognizing that any business owner who has been or will be victimized by what could be viewed as unfair lending practices might not agree. 

Although commercial banks have largely abandoned their previous commercial finance programs, new business lending options are rapidly emerging to fill the large void left by banks no longer active in this field. Flexible new funding programs for short term working capital are among the most promising alternatives.

Because confusion can result for even the most experienced business owner, it will be prudent for borrowers to seek the counsel of a business finance expert who will speak candidly about the prospects for a business seeking short term working capital financing. In most cases the new and more effective options for short term working capital and small business financing should be considered seriously by small businesses.

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